Transcript As at 31 August 2010

1
Presentation to the JSE / PSG
Septem
ber 2010
2
Agenda
Introduction
Results to 28 February 2010
Outlook
Introduction
3
What does Protech do?
Protech is a bulk earthworks and civil engineering group that offers fast-track contracting.
Its business offering includes:
Bulk earthworks
Roads and civil
works
Site clearance
Demolitions
Fast-track bulk earthworks
Basement excavation
Canal/river rehabilitation
Earthworks for
commercial,
industrial and retail
developments
 Crushing and screening
 Road construction
 Community infrastructure
services
 Dams and attenuation
ponds
 Airports and airfields
 Harbour and reclamation
works






Mining
 Mine infrastructure
development
 Earthworks
 Topsoil and overburden
removal
 Rehabilitation
 Slime dams
 Dump reclamation
 Materials handling
 Contract mining
Introduction
Plant hire and logistics
Impact compaction
Geotechnical laboratory and
survey services
Readymix concrete and
pumping services
4
What gives Protech the edge?
A focused producer of
efficiency
Proven quality
assurance
Fast track
specialists
Compete on
reputation,
not price
 Reputation as fastest in sector
― Guaranteed to be onsite in 24-48 hrs
― 100% track record for finishing in time or before time
― Proactively manage adversities to improve completion dates
 Expertise & experience (21 yrs)
Introduction
Above
average
margins
Margins underpinned by:
1. Cherry-picking work
2. Plant renewal policy
5
Quality client base
Protech Offices in Botswana, Zambia, Zimbabwe,
Blueand
chip
client base: bad debts < 1% of
Namibia
Tanzania
revenue
Introductio
n
5-year Performance: Profit Before
Tax
Rm
PBT remains
well above F2008 levels
following the peak of the
construction cycle in
F2009
Note: PBT used as a measure as it includes all historic acquisition funding costs
Introduction
6
7
Agenda
Introduction
Results to 28 February 2010
Outlook
Results to 28 February
2010
8
Results to 28 Feb 2010
Pleasing in light of results from most other
18%
construction sector players
Revenue
7%
R748,8m
Operating profit
24%
R118,6m
Operating margin
6 p.p.
15.8% vs 22.2%
EPS*
18%
20,9cps
5x covered
4,0cps
Maiden dividend declared
Market capitalisation**
R275,5m
P:E ratio**
3.7 times
* HEPS of 20,2cps declined by 22% as it excludes profit on sale of plant & equipment (i.t.o. plant replacement policy)
** As at 31 August 2010
Results to 28 February 2010
9
Results to 28 Feb 2010
Affected by 3 main factors
1. Excessive rainfall
50%
30%
 Areas of geographic operation much more concentrated than usual due
to new coal focus
 Rainfall exceed the last 60 years avg by > 100%
 Disrupted operations and delayed start-ups on new contracts
2. Worsening market conditions
 The recession’s negative impact was even more powerful in H2 2010
―
―
20%
Private & public infrastructure spending decimated
Increased competition
3. Public sector infrastructure spending paralysis
Results to 28
February 2010
10
Results to 28 Feb 2010
Earnings decline limited through unique business
model
Plant policy
 Fleet age & quality
‒ Plant max. 2 years old
‒ Demo-quality by end of term
‒ Protects against state of the
equipment market
 Balance sheet protection – no
impairments
‒ R3m profit on sale of equipment
 Competitive advantage: Fleet averages
1 year old vs 6 yr industry avg
High efficiencies secure above-average
margins
 Reputation as
– Providers of innovative solutions for
clients
– Ultra-efficient fast-track specialists
 Won contracts worth R1,5bn without
pricing stupidly
 Still have margin headroom
Ability to quickly shift sectors
 Sector flexibility combats market
conditions
 Successful shift into coal mining sector
Quality earnings
 Blue-chip clientele & well-entrenched risk
policy
 Bad debts only 0,08% of revenue
Results to 28
February 2010
11
Results to 28 Feb 2010
Statement of financial position
 Strong cash flow
 Capital intensive business, therefore traditionally high gearing
― Net gearing reduced to 57%
― Net interest cover of 7,6x vs. minimum target of 5x–6x
― However, gearing will increase in line with capex requirements
for specific contracts won
― There is sufficient equity in plant & equipment to cover the debt
(carrying value of PPE: R374m vs debt of R265m)
Results to 28
February 2010
12
Agenda
Introduction
Results to 28 February 2010
Outlook
Outlook
Divisional contributions to revenue &
operating profit
* Before eliminations
F2010
R769,3m
F2009
R708,7m
Contracting
Revenue*
Geotechnical
F2010
R117,6m
Operating Profit*
Readymix = R5,4m loss in F2010
Outlook
F2009
R150,6m
Readymix
13
14
Outlook: Contracting
1st
Sector preferences based on
margins
Private sector
 Non mining work has dried up; unlikely to show much improvement in H1 F2011
2nd
Mining sector
 Protech’s short term pipeline = 90% of work is on the mines
 Immediate focus remains coal – sustained activity due to global energy
demand
 Will broaden when other mining capex increases
 Owned fleet will grow to service 3-yr R340m blue-chip mining contract
3rd
Public sector
 Spend unlikely to increase meaningfully until government, provincial and
municipal management structures, processes & capacity improve
― Will continue to be selective in choosing contracts
Outlook
15
Outlook: Contracting (contd)
Current work in progress (short term)
Work in Progress at May
Total contracts awarded
Already executed
2010 (Rm)
2009 (Rm)
1 500
982
360
526
1 140
456
Total WIP still-to-beexecuted
(91% is new projects secured since
Nov 2009)
Starting F2011 with 99% of F2010 Group
revenue already secured
Outlook
16
Outlook: Contracting (contd)
R1,43bn realistic Pipeline as at May 2010 runs to
2012 (medium term)
Categories of work
Total
Rm
Realistic
expectation
Rm
1 140
1 140
Current Work in
Progress
- Still to be executed
Category 1
- Recommended by
professional team
170
±130
Category 2
- Shortlisted (imminent)*
320
±160
Category 3
- Un-adjudicated bids
900
-#
- Current WIP +
total imminent work
Category
+ Category
*Realistic
Note: Of the R300m
list at interim1results,
R263m (88%) was secured
2
# Not included in pipeline
±1 430
See appendix for breakdown of the pipeline and work in progress
Outlook
17
Outlook: Geotechnical
State of the art laboratories & SANAS*
accreditation:
 Improves credibility with existing clients
 Servicing of a wider selection of external clients in future
 Increased turnover on existing cost base
* SANAS: South African National Accreditation Systems
Outlook
18
Outlook: Readymix
 Protech culture now entrenched
 Successful shift out of Residential
 Pro-active management ensures that payments from RDP Housing
remain strictly under control
Current
F2011
Sector
Revenue
Supply to
expected
contr.
conditions
Residential
27%
(95% at
acquisition)
Industrial &
commercial
43%
Public
infrastructure
13%
RDP Housing
7%
Outlook
Mining
10%
Townhouse & estate
developers
Picking up
Shopping centres; light
industrial/engineering
Flat
parks; commercial
retail & office parks
Roads, bridges, storm
water drains,
Flat
reservoirs & hospitals
Unreliable
Building contractors
payment
Infrastructure
Picking up
19
Outlook: Group
H1
F2010
H2
F2010
H1 F2011
H2 F2011
 Includes  Brunt of  Longer duration
 Benefits of
of mining
the
initial
shorter term
contracts
means
downturn
effects
contracts won
H2 F2010
of
in H1 at
 Excessiv margins will
market
impact 12 months
higher
e rainfall
+
downtur
margins
n
 Pre However, full
 Slight
contract
benefit of mining
costs
improvement
contracts realised
(largely
expected in
as pre-contract
once-off) mine costs
Private
on
already sunk
Residential
mining
building
work
 Strong pipeline
sector
allows us to be
more selective on
the new margins
we accept on new
Outlook
shorter duration
H1 F2012
 Improved
market
conditions
20
Forward looking statements
Certain statements in this release that are neither reported financial
results nor other historical information are forward looking statements
including but not limited to predictions of or indications of future
earnings.
Undue reliance should not be placed on such statements because,
by their very nature, they are subject to known and unknown risks
and uncertainties and can be affected by other factors that could
cause actual results and company plans and objectives to differ
materially from those expressed or implied in the forward looking
statements.
The information in this presentation has not been reviewed or
reported on by Protech’s auditors.
Group outlook
21
Questions & answers